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Natural Gas Pipeline a "Must-Have" Says Governor; Calls Special Session



September 26, 2015
Saturday PM

(SitNews) - Alaska Governor Bill Walker issued a proclamation Thursday calling the Alaska Legislature into a special session next month to consider legislation to move a project forward to get the natural gas on the North Slope to market. Efforts to to commercialize North Slope gas dates back to the 1970s.

Addressing what the Governor describes as the urgency of North Slope gas production, Walker called the special session to be held in Juneau on October 24th.

“With a $3.5 billion budget deficit, this gasline project has gone from a wish-list item to a must-have,” said Governor Walker. “Under the negotiation process I inherited, very little has been accomplished on the commercial agreements. It is time to make the necessary legislative changes so a single party cannot delay the production of Alaska’s natural gas resources and sway our destiny.”

jpg Natural Gas Pipeline a "Must-have" Says Governor; Calls Special Session

In a short video address to Alaskans: Governor Walker explained the urgency of North Slope gas production.
Photo: Screen shot from video.

Part of Governor Walker’s legislation package, which will be introduced before the start of the special session, includes a proposal to buy TransCanada’s share of the gas pipeline and gas treatment facility. Governor Walker said this is absolutely critical to ensure Alaska has a seat at the negotiating table. The legislation package will also include a bill to reinstate a reserve tax on North Slope resources in the ground that are not developed. In 1975, Governor Bill Egan signed a similar piece of legislation allowing the state to collect oil revenue prior to the Trans-Alaska Pipeline being built.

“For far too long, Alaska’s gas has been treated like milk with no expiration date, and it never gets to the front of the cooler,” Governor Walker explained. “Without this insurance policy, Alaska runs the significant risk of never monetizing our gas resources for the benefit of all Alaskans and future generations.”

Governor Walker also released his administration’s review of the Alaska LNG project Thursday, which provides a brief history of the state’s prior efforts to produce North Slope gas, and explains why Alaska must take a more aggressive role in future gasline negotiations. The report summarizes the results of a review of the AKLNG project process, and highlights the challenges the project faces under the negotiating framework that was established by SB 138. Governor Walker noted the importance of releasing this report in time for the special session as it lays out the necessary changes to finally bring North Slope gas to market and to Alaskans.

“This legislation will vastly improve the probability of an Alaska gasline being built,” Governor Walker said. “It ensures that, if one or more producers delay construction of the gasline, Alaska still receives critical tax revenues from our natural gas resources. But only if we have the political will and courage to do so.”

Senator Cathy Giessel (R-Anchorage), Chair of the Senate Resources Committee, reacted to the Governor's Executive Proclamation to convene a special legislative saying, “While the Senate is enthusiastic about moving a natural gas project forward, and having a special session to accomplish this goal, the governor’s legislative priorities will make achieving that goal elusive,” Senator Giessel said.

The governor has asked the Alaska Legislature to consider a proposed tax on natural gas reserves and to consider an appropriation request to buy-out the interest of TransCanada, a pipeline company that has stood in for the State of Alaska’s interest on part of the project, according to Giessel.

“While the policy discussion of whether or not to terminate the State of Alaska’s relationship with TransCanada is timely and appropriate, proposing a reserves tax is something the administration has a tremendous burden to justify,” Senator Giessel said. “We have held over a dozen hearings on the topic of a gas project this year, and not once was a gas reserves tax seriously discussed in any of them. To see it on the call, frankly, takes me by surprise.”

The Alaska LNG Project is the framework the state has pursued since 2014, enshrined in Senate Bill 138, which passed the Legislature by a combined vote of 52-8. The state has partnered with ExxonMobil, BP, ConocoPhillips and TransCanada to finally create a North Slope natural gas project that brings gas to Alaskan homes, businesses, and to world markets, said Giessel.

According to Giessel, the governor’s proclamation did not include other elements the Legislature stands ready to consider and are within the purview of the administration. Missing elements include a property tax bill based on the framework negotiated with Department of Revenue Commissioner Randall Hoffbeck and mayors, whose districts sit along the proposed project corridor; a determination by the Department of Natural Resources Commissioner Mark Myers as to whether the state will take its gas royalty in kind or in the form of payments; and the selection of the five take-off points for natural gas to Alaskan communities along the pipe corridor, among others.

“The State of Alaska needs to get its house in order,” Senator Giessel said. “Resolving issues completely within our purview puts leverage on our partners to move on this project, while proposing a tax as a solution that failed by over 71,000 votes the last time it was tried doesn’t strike me as leverage, but as one more impediment to success.”

An initiative installing a gas reserves tax was defeated by two-thirds of Alaska’s voters in 2006.

“The governor’s proclamation does not come with any attached legislation on the topic of gas reserves, therefore I can only assume that the proposal is the same one voters overwhelmingly rejected in 2006,” Senator Giessel said.

According to Giessel, the governor’s rationale for proposing a reserves tax, to move what he has characterized as a process being slowed by the producing parties, is at odds with comments made by the management of the Alaska Gasline Development Corporation in a board meeting held Wednesday in Anchorage.

“One day I hear we are moving on schedule, and the next we are told to use a nuclear option on our partners, companies that have already spent billions of dollars on this project,” Senator Giessel said. “A goodwill trip to buyers will not convince world markets that Alaska is serious if we continue to act in such an erratic fashion.”

The late-October special session called by Gov. Walker will take place in Juneau, and that's right where Sen. Dennis Egan (D-Juneau) says it should be. Egan said Juneau is, as always, more than ready to play its constitutional role.

Egan said the Senate chamber is available already, and by the time the special session begins, construction will be winding down. "Both chambers will be available then, so both bodies will be able to meet at the same time," Egan said. Even during the height of construction the Capitol was a better venue for meetings, hearings, and sessions than the Anchorage LIO building, with more offices and multiple committee rooms wired for video and sound. "And the capital city has plenty of lodging and facilities to make legislators and staff feel at home, as always," added Egan.

Sessions held in Juneau have the advantage of consistent coverage by Gavel to Gavel said Egan, ensuring all Alaskans have access on TV and the Internet. And the Capitol building is significantly better-equipped than any other building in the state to facilitate the Legislature.

"By the time legislators arrive, the last cruise ship will have pulled out, so are no more excuses," Egan said. "Juneau is Alaska's capital city, and I thank the governor for realizing how important that is. The welcome mat is out, the mics are hot, and Juneau is open for the public's business."

Leadership of the Alaska House Majority Caucus also responded Thursday to what they described as Governor Walker’s resurrection of a failed plan to put in place a natural gas reserves tax on Alaska-approved leases. The governor included the failed Democrat-led voter initiative in his Special Session Proclamation Thursday afternoon said the House Majority Caucus leadership (Republicans).

“We are shocked, frankly,” said Alaska Speaker of the House Mike Chenault (R-Nikiski). “This reserves tax proposal wasn’t mentioned by the governor, at all, during our meeting to discuss special session options this past Monday. Why now?”

Speaker Chenault said the news is especially surprising on the heels of the governor’s much-hyped trip to Asia, where the governor trumpeted the interest in Alaska LNG by foreign companies and governments. “If the market is there, as he said on his return, then why is there a need to take a shot at our partners?” said Chenault.

Leadership of the Alaska House Majority Caucus worry that this latest unusual action taken by the governor can further harm the once-smoothly moving project to finally monetize Alaska’s vast North Slope natural gas stores.

“First, he fired the board of directors of the State’s pipeline entity, AGDC,” said House Rules Chair Craig Johnson (R-Anchorage). “Then, he said the pipe size needs to be larger, from 42-inches to 48-inches – and declared we were in direct “competition” with our partners. He’s switched lead negotiators on a couple of occasions, which hurt continuity. Then he missed several important deadlines the state was supposed to meet. So under his watch, we’ve gone from steady progress on the pipeline to, now, threatening our partners. The Governor is trying to blame everybody else. But the buck stops on his desk and he needs to take responsibility for his own actions which have clearly impacted this project.”

Majority leadership say the deadlines the governor has failed to meet are: bringing forward Royalty-in-Kind/Royalty-in-Value structures, bringing forward a Payment-in-Lieu-of-Taxes plan, and gas offtake points along the line for review and approval. The administration has missed all of these.

“What’s going so wrong in his negotiations that he has to take this unusual and confrontational step – out of the blue – and why hasn’t he been up front and straight-forward with us on this?” said Chenault. “Voters spoke in 2006, overwhelmingly, against this Democrat-led idea of a gas reserves tax - by a 2:1 margin. I think the governor has some explaining to do. We have between now and the end of the special session to get answers to these critical questions, in order to protect the progress and efforts made to keep this vital pipeline project moving.”

Alaska Independent Democratic Coalition (AIDC) Leader Rep. Chris Tuck (D-Anchorage) said, “A large natural gas pipeline will generate new revenue for the state, promote more oil and gas exploration, and create thousands of new, high-paying jobs.: Tuck said, “However, I believe the most significant benefit of a pipeline is the ability to use some of the gas to provide reliable and affordable energy to the people of Alaska, who continue to pay some of the highest energy costs in the nation.”

During next month’s special session, the members of the Alaska Legislature will consider legislation authorizing the state to buy TransCanada’s share of the long awaited AKLNG project. Lawmakers will also consider legislation putting in place a reserves tax on undeveloped North Slope natural gas.

“I like that the Governor is using our state sovereignty, as the owners of the natural gas, to negotiate from a position of strength,” said Rep. Tuck. “A natural gas pipeline is vital to the future of Alaska, and we can’t afford to let any major multi-national corporation kill the project. We need to consider the details of the proposed reserves tax, but this may be what it takes to stop the delaying tactics that have been used for decades and move forward on a gasline project.”

The members of the Alaska Independent Democratic Coalition say they are awaiting the release of the details of proposed legislation that will be considered during the Special Session.

House Speaker Chenault said Majority leadership is reviewing the proclamation and will request additional information and meetings with the governor and his administration in the days leading up to the Special Session, which is scheduled for Oct. 24 in Juneau.


On the Web:

Summary Report on the Review of The Alaska LNG Project Process - Includes history of early projects...

Goldman New Oil Order Report, September 2015


Source of News:

Office of Governor Bill Walker

Senator Cathy Giessel (R-Anchorage), Chair of the Senate Resources Committee

Sen. Dennis Egan (D-Juneau)

Alaska House Majority Caucus (Republicans)



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